Rules for investing black money in stocks relaxed

The government has relaxed the rules for investing untaxed money in the stock markets. 

The lock-in period for such investment has been revised to one year from three years.

Following the approval of Finance Bill 2020 in the parliament on Monday, the development came.

In the proposed budget, the government had declared to allow the investment of untaxed or black money in the capital market with the conditions of a 10 percent tax and three-year lock-in period.

However, it seemed unattractive as the government also allowed whitening of individual taxpayers' undisclosed cash, bank deposit, saving schemes at the same tax rate alongside whitening of real estate assets with a particular tax schedule. 

Most importantly no other asset classes other than the capital market instruments include a minimum period of mandatory holding.

So the capital market groups including the associations of brokers and investment bankers demanded it to be unconditional for the capital market as the budget proposal had been announced in the second week of June.

They also requested the government to cut the whitening tax for capital market investments to 5-7 percent so that the depressed market can attract taxpayers.

The Bangladesh Securities and Exchange Commission (BSEC) also requested the government to impose no lock-in period on black money if invested in the capital market.

However, the government responded to the requests with only reducing the lock-in period by two years. And it kept the tax rate of 10 percent unchanged.

The capital market stakeholders made some significant proposals for the budget but none of those except for keeping the tax incentive for zero coupon bond investors were addressed, according to a copy of the amended bill obtained by The Business Standard.

Market groups including their regulator BSEC requested the government to cut corporate tax for listed companies – like the one for non-listed companies – by 2.5 percentage points. No good news from here for the capital market investors.

In the proposed budget, the government outlined the way to lower the irrational income tax burden on brokerage fee from transactions of bonds and other exchange tradable securities – except for stocks and mutual funds.

Market groups also requested to cut the advance tax on brokerage commission for all securities alongside increasing the tax-free limit of individuals' annual dividend income and lowering corporate tax for merchant banks. 

However, the government ignored the requests.

Following the presentation of the proposed budget, the BSEC also made a proposal to attract business relocation of foreign companies to Bangladesh and inspire them to get listed on the local bourses.

It prescribed a five-year tax holiday if reputed foreign firms come here and prefer public listing.

The regulator also proposed extra facilities for them for their investments in special economic zones and stock market listing. No good news from here too.